November 26, 2007
The anti-business tax sentiment

The new business tax won't be collected for another six months, but there's already a media campaign being waged against it.

Radio ads in San Antonio, Austin, Dallas and Houston draw on tidal waves and scary movies to make a point about something they paint as just as frightening: Texas' new business tax.

"It's the difference between a tiny drop and a tidal wave. Because of the new Texas Margins Tax, small-business owners may see a slight drop in property taxes, but their business tax will increase up to 1,000 percent," says the script for one of the ads by the National Federation of Independent Business.

A second ad begins, " 'Tax Rage in Texas.' It's not a scary movie. It's a scary development for small-business owners across our state. Many small-business owners are seeing their tax bill increase 200, 400, even 1,000 percent!"

The campaign is a membership drive for the small-business group, but it's also an effort to urge legislative changes to the expanded business tax part of a package that also lowered local school property tax rates, and to make the tax a top 2008 campaign issue.

"I don't know how on Earth someone can run for election saying, 'Hey, you're not making money. Give the state a little extra money,' " said Will Newton, executive director of the National Federation of Independent Business/Texas.


The new business tax, which replaced the franchise tax, is based on gross receipts -- either 1 percent or half a percent, depending on the type of business -- with deductions for cost of goods sold or employee benefits.

Backers say the new tax is fairer, bringing businesses into the system that weren't paying. They say companies that will owe higher business taxes must also look at whether that's offset by lower local school tax rates. They cite adjustments made this year meant to benefit smaller businesses.

"The goal ... is to keep Texas business-friendly," said Rep. Jim Keffer, R-Eastland, chairman of the tax-writing House Ways and Means Committee. "We certainly in the Legislature strove to protect small business."

Keffer bristles at the ads, contending that NFIB/Texas "did not come and really try to work with us on any of this. Pretty much they were against the whole process."

Whatever. Look, the new business tax isn't the end of the rainbow. It's got to be a better idea than the pointless, almost-never-collected franchise tax, but it was designed for a purpose it couldn't ever fulfill, which was the ridiculous property tax cut. I can't say it's good public policy, because our entire outdated, jerryrigged tax structure in this state is bad public policy. It may be the best we can do given that a complete overhaul of the system isn't in the cards, but if so it'll be more by accident than design. Sooner or later, something is going to give, and when it does it won't be pretty.

None of this is to say that I have any sympathy for NFIB/Texas and its whining. They're not interested in solving problems, they just want to not be taxed. The line for that one forms to the left, fellas.

Posted by Charles Kuffner on November 26, 2007 to Budget ballyhoo